FB earnings outlook: snap earnings show a bad omen, and the risk of Apple’s privacy change surges


Tencent technology news on October 25, in the latest quarterly financial report released last week, snap, the parent company of American social software snapchat, said that Apple’s recent changes to mobile advertising privacy rules had an impact on its revenue. Now, investors want to know what this means for Facebook?
After the closing of Monday local time, Facebook will announce the third quarter earnings of 2021, but the news from snap led to Facebook’s share price falling 5.1% on Friday because the former’s performance was worse than expected.
A major concern for investors is the impact of Apple’s change in mobile device targeted advertising: apple now asks users whether they are willing to choose to be tracked. According to flurry, a research company, only 15% of American consumers choose to be tracked. Facebook’s results will show how widely this will affect companies focusing on mobile advertising.
According to the survey data of FactSet, a financial data and software company, Wall Street generally expects Facebook’s revenue in the third quarter to be $29.57 billion, up from $21.47 billion in the same period last year; Earnings per share was $3.19, up from $2.71 in the same period last year. Analysts also predicted that Facebook had 2.92 billion monthly active users and 1.93 billion daily active users in the quarter.
Colin Sebastian, an analyst at Baird, an American investment bank, wrote: “we expect Facebook’s third quarter results and prospects to be slightly better than snap because the company has previously acknowledged the existence of adverse factors and more actively developed tools to help evaluate and judge.”
But evercore ISI analyst mark Mahaney warned that the online advertising environment and the recent rule changes of rival Apple put Facebook at “the greatest risk” among the large Internet companies that are about to enter the earnings season. Mahani said that e-commerce spending is cooling down after the rapid surge a year ago. Apple’s measures provide consumers with greater flexibility to opt out of advertising tracking, but Apple’s changes bring the risk of “being underestimated”.
In its financial report released last week, snap warned that the change in Apple’s privacy policy had seriously damaged snap’s revenue in the third quarter and was likely to last at least until the end of this year. Snap executives also attributed the shortage of online advertising to global supply chain constraints, and online advertising is crucial to snap’s finances. Facebook is the most outspoken critic of Apple’s policy, and the latter’s move seems to be mainly aimed at Facebook.
Brad Erickson, an analyst at RBC Capital Markets, warned that next year’s online advertising market “is a persistent problem”, and this year’s spending slowdown may lead to a 22% decline in Facebook’s sales in the second half of 2021.
AB Bernstein analyst mark Shmulik once said in his report: “there are three topics to avoid on the table: politics, religion and Facebook. Once you include Facebook in the controversy, it is easy to trigger a heated debate about whether the company is’ evil ‘or’ scapegoat ‘.” he rated Facebook’s stock as “stronger than the market” , the target share price for the next 12 months is expected to be $450.
Now, there are more and more negative news about Facebook, and the company is even considering changing its name. Earlier this month, “whistleblower” Frances Haugen submitted internal data and documents about Facebook to members of Congress, regulators and journalists, which seemed to win more support for controlling the company in Washington, D.C. However, it is unclear what measures parliamentarians will take.
In a statement released on twitter, Andy stone, Facebook’s director of policy communication, said that the company did not agree with many descriptions of the problems mentioned by Hogan in his testimony, but called on legislators to formulate a set of Internet standard rules.
Investors may wonder whether Facebook’s possible name change is related to a series of disputes over user data and the potential impact on political polarization in recent years. On the other hand, the company not only has a social network with the same name, but also has instagram, WhatsApp and oculus, a virtual reality (VR) manufacturer.
The prospects of instagram and WhatsApp are uncertain. They may become the targets of M & a legislation to be passed by Arkansas Republican Senator Tom cotton. In addition, there are concerns that young users are losing a lot from these services. Previously disclosed internal documents showed that Facebook executives were worried about teenagers turning from instagram to services such as snap and tiktok.
There was also a six hour outage earlier this month, which could cost Facebook millions of dollars in revenue in the fourth quarter and could be included in the company’s forecast. David Wehner, Facebook’s chief financial officer, may disclose the cost of downtime on the earnings conference call.
In addition to Monday’s earnings conference call, investors will also hear a speech by Facebook CEO Mark Zuckerberg on October 28, when he will speak at the Facebook connect virtual conference. Zuckerberg will discuss Facebook’s interest in the “metauniverse”. Yuanuniverse is widely regarded as the successor of the Internet. Users can socialize, shop and entertain in this always online virtual world.

Facebook has been following metauniverse for some time, and the company acquired oculus in 2014. At the earnings conference call in July, Zuckerberg said that building a metauniverse is the company’s long-term ambition. But Facebook is not the only company trying to build a metauniverse. In the field of video games, Epic Games’ fortress night, roblox and Microsoft’s my world have made breakthroughs in building such online experiences.
Facebook’s share price is up 25% so far this year, while the S & P 500 index is up 21% over the same period. However, Facebook’s share price fell 14% from the beginning of September. (reviewed by Tencent technology / Jinlu)